Google Reveals Its Product Formula

As Google Inc. has moved beyond Web search and into product areas as diverse as e-mail, photo-organizing software and mapping tools, one of the common questions for the company is how it decides where to devote resources.

In classic Google fashion, its executives answered with a formula, one that CEO Eric Schmidt said was derived from the mathematical calculations of cofounder Sergey Brin.

Google is striving to split its product investments three ways, following a formula of "70-20-10," Schmidt told analysts gathered at the companys Mountain View, Calif. headquarters.

Seventy percent would target its core search and advertising products, while 20 percent would focus on adjacent products, such as its newer desktop and product search services.

The final 10 percent would center on the most experimental products, those "things that are truly interesting to us," Schmidt said. These projects would include ones where the company remains unsure if users will adopt the service or if it would make money, but such experiments are critical for the long term.

"Every company that has forgotten to remain innovative has ultimately lost in the next technology change," Schmidt told analysts. "So the 70-20-10 turns out to be roughly the right answer for us."

When Google tested the goal against its current operations, it found that it was close to already following the formula.

Products can move among the categories as well. Google News, a service for searching news articles, and Froogle, a product search service, are both beta products that fall into the category of adjacent products, Schmidt said. But they are likely candidates for moving into the "70 percent" category of core products over time, he said.

Analysts peppered Google executives with questions ranging from whether the company was developing a Web browser or voice-over-IP services to how it will manage a business that is growing at a record pace.

The executives steered clear of divulging any specific product plans for the future, instead outlining the companys broader plans to become more global and extend its advertising reach.

During a question-and-answer session, Brin said that Google has an "objective this year of becoming an international company" as opposed to a U.S. company with some global operations. Brin is president of technology at Google.

Googles Global Push

To continue to expand worldwide, Google expects to follow the same growth track it has used in the United States. The model is one where Googles main search technology draws enough traffic to its local site and to partners that it then can support the addition of its advertising-based revenue model, said Jonathan Rosenberg, vice president of product management.

Google sells ads in an auction-based model through its AdWords program. Advertisers pay based on clicks to their sponsored links. Through another program called AdSense, Google extends the ads to other search-partner and publisher sites.

Googles Web search interface is available in 104 languages, while its online interface for its AdWords ad program is available in 41 languages, Rosenberg said.

Beyond a more global push, Google also wants to expand the diversity of advertisers that are using its AdWords program. While it has advertisers of various sizes and from many industries, its typical advertiser is a medium-sized company, Schmidt said.

"We still do not as a company have all the products and services to serve the largest advertisers or the smallest advertisers," Schmidt said. "That is all stuff under development."

Google is known for releasing new services as beta tests and keeping them in beta indefinitely, often for years. Such services as Google News, Froogle, Gmail and Google Local remain betas, though Google has heavily promoted them to users.

Asked about Googles beta policy, cofounder Larry Page explained that Google keeps products and services in beta as long as its engineers expect to continue to make major changes to them. Googles betas also are central to its identity.

"Google itself was in beta for a very substantial number of years," said Page, who is president of products. "Part of our brand is that we under-promise and we over-deliver, and being in beta is part of that. Its part of our branding strategy."

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